Furthering the Role of Corporate Finance in Economic Growth
Countries with similar rates of saving differ in economic growth. Why?
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My research question is: Why do countries with similar rates of saving differ in economic growth? My thesis addresses this question by formulating an endogenous growth model using the Cobb-Douglas production function.My model disaggregates the rate of saving into the retention ratio and the household saving ratio and connects these ratios with three new parameters representing respectively the efficiency of financial institutions, the decision-making of managers, and barriers to technology diffusion.The Cobb-Douglas production function assumes diminishing marginal productivity under constant r...
My research question is: Why do countries with similar rates of saving differ in economic growth? My thesis addresses this question by formulating an endogenous growth model using the Cobb-Douglas production function.My model disaggregates the rate of saving into the retention ratio and the household saving ratio and connects these ratios with three new parameters representing respectively the efficiency of financial institutions, the decision-making of managers, and barriers to technology diffusion.The Cobb-Douglas production function assumes diminishing marginal productivity under constant returns to scale. My model, however, measures the growth rate of per capita output under the balanced growth state/constant returns to capital situation. This situation is guaranteed when the relative share of profit is within the critical relative share of profit.In short, the three financial parameters play an important role in economic growth. When we divide saving into corporate saving and household saving, the rate of saving as a whole is not independent of the growth rate.
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